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Abu Dhabi, UAETuesday 17 July 2018

Middle East to see smallest rise in construction cost among global markets 

Cost of construction in the UAE stands at $1,455 per square metre, compared with $3,900 in New York, Turner & Townsend report says

Middle East construction costs to see smallest rise among global markets in 2018, according to Turner & Townsend. Andrew Henderson/The National.
Middle East construction costs to see smallest rise among global markets in 2018, according to Turner & Townsend. Andrew Henderson/The National.

The Middle East is projected to have the lowest increase in the cost of construction globally in 2018 as the higher oil oil earnings won’t immediately be translated into government investments, according to the project management consultancy Turner & Townsend.

The UAE will see a 2 per cent increase in construction costs while the rise in Oman will be just 1 per cent, according to survey carried out by Turner & Townsend. Average construction cost inflation globally stands at 4.3 per cent.

“Governments across the Middle East are taking active steps to diversify their economies and move away from their reliance on oil,” Alan Talabani, the firm's regional managing director, said.

“This is a long-term challenge and, for the moment, oil prices remain the most important factor influencing capital investment decisions in the region. As prices return to stable levels and the region prepares for major events such as the Expo 2020 Dubai, both governments and private investors should focus on the opportunity to drive better outcomes from their investment plans.”

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The Construction Market Survey 2018, which collected data from 46 markets globally, found that New York, San Francisco, Hong Kong, Zurich and London were among some of the most expensive cities to build in. New York is ranked at the top with cost of construction standing at $3,900 per square metre. In contrast, it is $1,455 per square metre in the UAE and $1,338 per square metre in Muscat.

The report noted that the UAE government has continued to spend on big infrastructure projects ahead of major events like Expo 2020. However, in Oman, the state budget for development in 2018 is 17 per cent lower than the previous year but that private sector investment could offset some of that reduction amid increased interest in commercial development such as the $2.6 billion railway link to transport limestone from mines in Al Shuwaymiyah.

The report stressed the need for a major change in the manner the construction industry around the world is conducting business.

“We need a worldwide shake-up of the industry model to bring about greater collaboration between investors, asset owners and the supply chain, incentivising innovation and rewarding those who deliver better outcomes,” Mr Talabani said.

“In the Middle East, this means greater sharing of risk and reward between clients and contractor, and such steps will help to reduce lengthy disputes and allow clients to get a greater return on investment.”